Subscribe to receive updates on Artificial Intelligence
Get the latest news on Artificial Intelligence delivered to your inbox with our myFT Daily Digest email every morning.
The co-founder of Stability AI, an artificial intelligence company, has filed a lawsuit against the company and its CEO, alleging that he was deceived into selling his 15% stake in the $1 billion startup for only $100.
Cyrus Hodes, who co-founded Stability AI with current CEO Emad Mostaque in 2020, claims in the lawsuit filed on Thursday that Mostaque convinced him that the “company he had helped build was essentially worthless” before purchasing his stake.
However, in August 2022, just three months after buying out his co-founder, Mostaque led a $101 million funding round that valued the UK-based company at $1 billion. The suit states that Stability AI is now seeking new capital at a $4 billion valuation, taking advantage of the growing interest in generative AI following OpenAI’s release of ChatGPT.
If Hodes had retained his shares, they could now be worth approximately $500 million if Mostaque achieves his target valuation.
“Mostaque’s purchase of these shares from his co-founder and minority shareholder for a mere $100.00 epitomizes corporate greed at its worst and simply shocks the conscience,” the lawsuit alleges. The suit was filed in San Francisco.
“The suit is without merit and we will aggressively defend our position,” Stability AI responded.
Headquartered in London with operations in San Francisco, Stability AI positions itself as the “world’s leading open-source generative AI company,” providing support to researchers developing AI models.
Stability AI is best known for its contribution to Stable Diffusion, a tool that can generate photorealistic images from text inputs, which gained significant popularity since its launch last year.
The technology behind Stable Diffusion was developed by a group of researchers in Munich and at Runway, an applied AI research company, while Stability AI provided computing power and training data to assist their efforts.
Hodes has been involved in AI projects for nearly a decade, including advisory roles for the United Arab Emirates and the OECD on the national implications of the technology.
According to the lawsuit, he met Mostaque at a summit in Dubai in 2019, and their friendship eventually turned into a business partnership.
In the early days of Stability AI, Hodes was working on developing a generative AI tool to assist governments in responding to the Covid-19 pandemic. However, the project was deemed unsuccessful as Mostaque shifted focus towards building the text-to-image tool that became Stable Diffusion.
The lawsuit alleges that Hodes grew concerned about Mostaque’s management of the company, claiming that Mostaque used Stability AI’s funds to pay for his family’s luxury apartment in London. In light of Mostaque’s misconduct and failure to deliver the Covid project, Hodes decided to leave the company, fearing personal liability and damage to his reputation.
The suit also states that Mostaque and Stability AI never disclosed their discussions with venture capital firms to Hodes, including the company’s new business plan involving text-to-image generation.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
